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Behind The Story Show
Why Creative Businesses Stay Busy but Not Profitable
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Jelani Gonzalez
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In this episode of Behind the Story, Jelani Gonzalez sits down with Michelle Williams, founder of Scarlet Thread Consulting and host of Profit is a Choice, for a powerful conversation about what creative entrepreneurs often miss when building a business.
Michelle works with interior designers, architects, builders, stagers, upholsterers, drapery workrooms, and other creative business owners to help them turn talent into profit. In this conversation, she explains why many creatives are busy, booked, and talented — but still not making the money they should.
Michelle breaks down pricing for profit, knowing your numbers, cash-flow timing, discount pressure, gross profit margins, strategic planning, and why financial shame keeps so many business owners stuck.
This episode is a must-listen for creative entrepreneurs, interior designers, coaches, consultants, and small business owners who want to build a business that is not only successful on the outside, but sustainable behind the scenes.
Jelani Gonzalez: Let's start at the obvious place in the beginning. what do you actually do and what are you most known for
Michele Williams: Yeah, I am a business coach and a consultant and work primarily in the interior design industry and that includes architects, builders, drapery workrooms, upholsterers, stagers, and interior designers. So it's a much larger industry than maybe we think out at the outset. And what I to do, I would say what ⁓ my secret weapon is ⁓ I help find maintain profitability. ⁓ I always say that there are three things that I want people that I work with to have when they walk away. I them to know and understand how to create a strategic plan or some type of a strategy. I want them to know how to read and understand their financials for decision making. And I want them to have a framework for decision making. Because to me, that's where that intersection, of strategy and finance, that's where the magic happens. Because if we've got a plan and no money behind it, it's very difficult. If we've got the money and no plan, then we're kind of running amok. But when we can get those two in alignment and really have them going in the same direction. Because if you think about it, strategy and finance touches every aspect of a business. There's not really a part that doesn't cost something. And see a lot of businesses that have a lot of great talent, but they're not thinking about how the business pieces fit together. ⁓ their marketing objectives might not match with their financial objectives, which might not match with their HR objectives.
Jelani Gonzalez: ⁓ you realize that, that it wasn't a creative or talent problem, but ⁓ strategy or business model problem?
Michele Williams: Yeah, I would say I probably recognized it around five to seven years ago prior to that. So I started my career working for a software company building financial software. And after I did that, I came home to raise my children and I started an interior design business, literally doing the work in interior design ⁓ realized that I either wasn't making money. ⁓ or I was making money but I wasn't sure where to spend it in the company. Like what do I do next? Do I hire? Do I grow? do I do here? Because very different to run with somebody else's plan and a corporation than to create your own plan and run with your own plan. And so I started figuring out putting the pieces together, other businesses started coming to me and going, what are you doing? How are you doing that? Well, I thought it was... The way that it presented was a financial problem. And so would come and I would teach them to read their P &L, teach them to read a balance sheet, ⁓ them what the numbers actually meant, just not how to see them on the page, but ⁓ to use those numbers for forward decision making. And they would come to me and I offered ⁓ a called CFO to Go, which is let me just show you how to read your numbers and then you go on your merry way, like you're not tied to me forever. The problem when I was reading their financials and helping them understand, the financials are telling us a story of everything that happened in the past. They're not telling us a story of everything happening in the future. so looking at the numbers through the lens of the past only gives us a piece of it. So then I would say, okay, here's where we are. Tell me where you want to go and let's see if the financials support it. They couldn't tell me. Not came me with a strategic plan, with a a written down ⁓ like this is with clarity where I want to go and what I'm trying to become as a business owner or as a small business. None them, it ⁓ didn't show up. And that's when I realized there was a big disconnect between the marketing that they were doing and the financials that they had and the business they were trying to create because they didn't have it codified anywhere.
Jelani Gonzalez: are some of symptoms that you see?
Michele Williams: Yeah, so I would say some of the symptoms are things like I have all this money sitting in a bank account and I don't know how to spend it. So sometimes it wasn't because sales and marketing didn't work. It's because it was working really well, but they didn't know which part is mine, which part is the client's. They didn't know what are the things that I've promised to do with that money. So the bank account's getting larger and larger and they don't know what can come in. that they can still breathe about thinking I'm going to be taxed on it or whatever. Or would conversely get the, I'm working all the time, but I'm not making what I need to make. I don't see where the money's coming in. Or I have a real marketing plan, but I've got to go market. I need to show up. And I would say, what is it that you're, who are you trying to bring in? What are you trying to accomplish? What are you to get to? And they couldn't answer the question. So then I would. back it up and say, then who are you going to get to take them where you don't know where you want to go? Like, how does that work? And they just didn't matter. They couldn't answer it. They could answer a piece. Like, I want type of project. OK, so you want how many of those projects? One or seven. Do you want to grow a team or do you want to keep the team small and boutique? What is it that you want? And you press, press, press, I could get pieces of the answer. But they had never sat down and just thought through where they wanted to go. They were so kind of encumbered by the weeds of the business of the today that they couldn't see where they wanted to go in the future. then any financial plan, I mean, how do you build the financial plan or a marketing plan or an operations plan if you don't know where you're going? The best that you can hope for is to solve a today problem.
Jelani Gonzalez: reading. your website I came across something called pricing for profit. What's that what's pricing profit?
Michele Williams: Well, I also recognized in a very creative industry, which interior design is, it's very difficult if we are only pricing for the commodity or for the cost of goods or for the product. We're not literally thinking about what is it that we need the business to do for us. I always ask the question. ⁓ you're working in this business, so let's identify what you're doing for the business, but let's also identify what does the business need to do for you. so if we need the business to pay off debt, if we need the business to have for capital improvement or for the future, that money only comes from the profits. And so we're only pricing to break even, we're not going to be profitable. We have to price for the future. We have to price for what the business is going. We have to price in a way we can, you know, take care of the bills of today and have some leftover to do the planning for future. And many people weren't doing that. It's almost they were afraid to price or they hadn't even thought about pricing for profits. You're not even to believe this, but early on, I remember people saying to me, why am I, if I'm getting paid, why do I ⁓ price for profit and I had to explain to them to have a sustainable business. The business has to make more than just paying today's bills that was like a novel concept to them.
Jelani Gonzalez: were some of the pricing myths ⁓ would come across, for example, in those conversations?
Michele Williams: think a lot of people thought because they were having to, that was an idea that they were creating in their mind. They found much more difficult price than if they bought a product. ⁓ Like if I a desk for somebody, I knew how much to mark that up, right? Because the market kind of tells you how to mark that up. You can look at an MSRP, you can gather information on a hard product, an idea is so much more difficult to so a lot of people were struggling with the pricing of an idea or the pricing of a concept or the pricing of a design or of a thought. And so really trying to help them step back and look at what is the transformation that is happening, ⁓ The same as in coaching, we're doing the same thing. What is the transformation that I'm helping provide to you and your team versus the three to five minutes that I'm spending with you or 30 minutes or hour or whatever that might be. Meaning we're not just pricing our time. And I think that was the big piece that a lot of them were missing. Also, understanding that they could price what the around them and the market around them allowed. ⁓ so my clients that are in one part of the world or one part of the country, ⁓ may have a different pricing scheme than somebody else. Just making sure that they were covering all of the costs that were involved. It's almost like many them were absorbing cost at the beginning. that they didn't need to absorb. They needed to put back into the cost of the product. And they just didn't understand how those pieces fit together. Especially when you're starting a small business or micro business. to be honest, of these people started, many people in a very creative business, you can look at artists, you can look at photographers, you can look at designers, a lot of those businesses that are creative in nature, they have strong business backgrounds. That's not what they studied. That's not You know, not that they can't do it. They absolutely can't. It's just they're not as familiar with that. They're more familiar with the work of their artistry or the work that they are producing. And so they come at pricing and business little differently than somebody who has ⁓ finance or an economics background. They're going to come up at it very, you know, I would say linearly, logically, this plus this equals that where the others don't feel that way. That's just not how they attack it. And so really helping them mix that, creative brain and then that logical financial brain so that they can put a price tag on what they are creating. I mean, that's a sweet spot. I love that. Because then they start to see the worth of what it is they're doing separate from them as a person.
Jelani Gonzalez: If I come to you for help and I say, hey, I'm really busy in my business, but my bank account doesn't show it, what's your diagnosis checklist? Like, how do you diagnose my problem?
Michele Williams: Yeah, so the first thing I'm going to say is let me see your profit and loss statement and your balance sheet for the last couple of years. And I want to see them in a cash basis and I want to see them in an accrual basis. Because I want to see what's happening daily, like cash in, cash out. I want to be able to see what cash flow looks like. I want to see the promises, like the promise of work to come that we would see in an accrual or the promise of the bills that we're going to be paying. I'm going to start there. ⁓ Then I'm going to ask you, especially if you are an interior designer or you're on the very creative side, I'm going to say, let me see your time tracking reports. I want to see where your time is going. What are you spending your time on? then we're going to start walking back and I'm going to start looking at what are the cost of goods? You know, what is it that it's costing you to produce whatever it is you're producing? ⁓ are the cost of your expenses? ⁓ then how are you charging? How much are you charging? How much are you working? Because usually a couple of things happening. Either there is pricing problem or a spending problem. And I've got to figure out which one it is. Because if you're so, so busy and not making enough, you're either not charging enough or you're overspending for what you're doing or combo of the two. So we've just got to kind of diagnose, this a, Jelani is working all the time, but he's giving half his time away for free problem? Or is working all the time and he's just charging or he's charging charging perfectly, but he's out here buying the things that he probably doesn't need to buy out of the business. And I've seen both sides of it.
Jelani Gonzalez: One of my mentors used to always say, always know your numbers. should always know your numbers. What the numbers you would suggest for a design business person that they should track either weekly or daily or monthly? ⁓
Michele Williams: So a couple, I think it's always important to know what we call your monthly nut. So what are the operational expenses that need to be paid every month, right? And a lot of times you can take that if you just did like some quick averages, you could look at the past year and look at your total operational expenses, divide it by 12 and just say on average our expenses are 35,000 a month. Well, then you know that I need to be bringing in enough money to cover the 35,000 a month. So I think that's really important. is, think it's important to understand revenue you're trying to hit. And I like to look at it yearly, quarterly, and monthly. Some companies, may even drive it down to weekly and daily based on the cadence of what you're doing. It's important to your gross profit margins. Because if you understand your gross profit margin, then you can also understand your cost of goods margin. ⁓ So if I how much of every dollar that comes in my company, goes out to complete the sale through cost of goods or cost of sales. I know how much is left and what we would call real revenue in a profit first world or gross profit. That's the money we have to run the company and that's the money we have that funds the net profit for us to have all the extra things that we want, the sustainability. So to me, if I know revenue, cost of goods and gross profit, then if I have a good idea of that monthly net expenses, I can just about parse out anything else that I need to from there.
Jelani Gonzalez: Is there one cash flow decision that would probably feel really uncomfortable for the business owner that would have an immediate impact on their cash flow?
Michele Williams: Well, ⁓ flow is interesting, right? Because they say cash is king, and it's true. Cash the thing that keeps the business running. It is the lifeblood, which is why we always are looking at sales sales once the next sale coming in. But the thing about cash flow is it's not does the cash flow, but does the cash flow at the right time. And so I a lot of it comes down to being familiar. with the cash flow in your company, not just the amount that's coming in, but the timing of things. quickly, and when do you consider something cash that you can spend? For example, in design, people sometimes are taking really big upfront payments that have to last for 12 months because they're building a house for you. They're doing these things for you. ⁓ So not that. because you give me $100,000 on March the 5th that I get to go spend all that money. I might have gotten the cash to flow in, but I can't actively use that cash. I have to parse it out over the months or using milestones or something. So it's not even just understanding cash flow, it's understanding the timing of it and revenue recognition so that I know, and that's very uncomfortable because it's much easier to say you gave me $100,000, I have $100,000. But some of that 100,000, I really can't even recognize until December because I've not done the work. work is still sitting out there. ⁓ it's not just the money coming in, but it's when the money available for use? ⁓
Jelani Gonzalez: back to what we talked about earlier in pricing for profits, how do you code somebody to handle discount pressure?
Michele Williams: Yeah, so true. You know, I used to hate the term, well, can you sharpen your pencil on that? Like I just, I it just like I can feel some kind of way when they say that. And my comment usually something along the lines, I sharpened my pencil before I got here. In other words, a discount, we have ask the question, what are they really asking? And what am I willing to do? And most of the companies I work with,
Jelani Gonzalez: Brilliant.
Michele Williams: I'm not encouraging discount behavior because once you discount, you now have taught them to ask for the discount and every person that they go tell about you, Jelani is so awesome, you've got to go work with him, but make sure you ask him for a discount and he'll give it to you. So you've now created this method of behavior that's probably not serving you in the long run. So when somebody says to me, you know, do you offer any discounts? My answer is usually along the lines of no, but if there's something that you would like to remove to get within your budget, tell me what your budget is and let's see what we can change, delete, you know, work with to get you within a budget that is more comfortable for you.
Jelani Gonzalez: That's brilliant. I love it. had a mentor used to always say the same thing that he doesn't discount his prices. He's allergic to free. ⁓ it's a question of value, he will increase the value so that the price is more justified because he never offers everything in one fell swoop. So right with you. I completely understand what you're going for.
Michele Williams: I love that. and the thing that I love about that is sometimes the things that they're asking for, you can make small tweaks and you can actually change the amount, you will, larger than the changes that you made, but they don't know that. ⁓ So like to just associate a discount with a loss of something. Like you don't get it just because you asked. And so, ⁓ but know what? I will say this. I think sometimes when we start off,
Jelani Gonzalez: Mm-hmm. Right. Exactly.
Michele Williams: by saying my goal is to give you the best price possible, that that is under my company brand, like this is the lowest level of quality or service that I'm willing to stake my brand reputation on, and you've built that trust factor with the client, then they're not necessarily, they don't necessarily want a discount, because that might mean lower quality, lower value. So you've already kind of got an agreement on. the value and the quality. then the price to me becomes tertiary. think that whenever you are in a pricing situation and price comes first, it's to be a fight because they're price buyers. I want and value buyers that then have the price associated a certain level of quality and value because now we are having a completely different conversation.
Jelani Gonzalez: Perfect. If you're consulting with a business and they're stuck, is there a typical bottleneck or a place that you immediately start to examine or is this just all random?
Michele Williams: Yeah, I love the fix this next kind of framework, Mike McCallowitz. what it says is if you think of business like this triangle, like a hierarchy, ⁓ starts with sales. So I'm looking to see, we have a sales problem? Like, is this money coming in the door? ⁓ that, we look at profitability. ⁓ if I've got sales, am I making money? Am I profitable? After that, I'm going to look at order. So we've got money coming in the door sales, we have profits. do we have a structure problem or a process problem? Because sometimes as the businesses grow, the processes we had don't support that growing business. After then we're looking at things like impact and legacy. What are we doing for the community? What are we doing for the world? Are we able ⁓ to this management turn? Is my problem that I want to retire and there's nobody behind me to bring up to sell the company to? ⁓ So I'm really looking at those five areas. What does the sales process look like? What do profits look like? What type of SOPs and do you have written? ⁓ is it that you're trying to create with your vision? So that strategy of impact. And then what is it that you're trying to get out of this? And then we can dial in from there.
Jelani Gonzalez: And then up, when you think about profitability, what's faster to get there? Is it raising prices ⁓ or tightening on operations?
Michele Williams: Yes and yes. they go together, right? To I'm looking for the quick wins though, because anytime we can get a quick win, it kind releases an endorphin and we want to go back and try to get the next quick win. So the first thing I'm going to do is say, let's look at your operating expenses and see if there's anything happening that we can trim. Is there anything that we can change? Is there anything that we can do? ⁓ Because sometimes some real low lying fruit right in there that we can just... get out of there and that quick win. The next thing I'm gonna do is I'm gonna start looking at your buying power. Let's look at your cost of goods sold. What is it costing you to get that product into the hands of the consumer? And are you paying too much to do that? So if I can reduce those two expense categories in some way, you're get an initial bang. Then we're start looking deeper and we're gonna start looking at what does your pricing look like? Do we need to raise rates? Raising rates with higher cost of goods. We're just chasing ourselves I'd rather keep the rates and lower the cost to deliver and so it I'm going after expenses to get some quick wins and then we're gonna start looking I mean we're even gonna be looking at salaries, right? Do we have the right people in the right seats? And are we paying them the right amounts? What do we need to increase and decrease? But yeah, I'm gonna probably do a little bit of both right there together
Jelani Gonzalez: What's the, reflecting on you personally now, what's the hardest lesson that you've learned that you now teach to people that you consult with and you teach that with conviction because you know it will have an incredible impact on them?
Michele Williams: I think it goes back to something you said a minute ago that I think you said your mentor told you and that's know your numbers. You know, the reason that I do all of this and just transparency is I started my business back in 2000 and by 2002, 2003, I had a negative net profit. And I realized that I was so focused on the delivering of the product and service. I wasn't as focused on taking care of the business. so that whole, you know, put on your own mask first. I wasn't asking as much of the business as it had the opportunity to provide for me. I asking it for the full salary that I needed it to replace from my corporate ace. I wasn't asking it to give me profitability in 401ks retirement plans. I just wasn't asking it of it. And so when started realizing what I needed from, if I wasn't going to do it, and I couldn't create it in the business, I was gonna go back to corporate because I could make the money there. I really wanted to do what I was doing and there had to be a way. And only way to do that was to know my numbers. So the first thing I'm gonna say is know them, but when I say know them, here's what a lot of people do. I've seen this over and over. They get profit and loss statement, they get that balance sheet, they get that report from their bookkeeper accountant, they glance at and they will say, know it. Knowing it is different than looking at it. So knowing it is knowing what the number is, knowing what the number represents, and knowing how the number in relationship to the other numbers around it. That's knowing. It's a understanding than visually at something. ⁓ And I think lot of people hear that know your numbers and they visually look, but they don't know what to do with it. ⁓ So if you close gap, so that you know what it is, that's when you start asking the questions about strategy. Because now I know what the numbers are, I know what they mean, and I know how they work in relationship. Well, now I want a different outcome, so now how do all these things converge to get me to the new outcome?
Jelani Gonzalez: That's very true. One of the people that I read his biography, Reginald Lewis, he used to talk about when you look at numbers on a sheet, you have to know what's behind that number. Like, what does that number actually represent? Because then that should tell a story. It's not just a number on the page, obviously. Yeah, so. ⁓
Michele Williams: That's exactly it. That's exactly like so much so that when I'm looking at a profit and loss statement, we're going line by line. I mean, we're on a zoom call and we are going line by line and I'm asking them what makes up that number. I'll tell you many cannot tell me they're looking at it every month, but they don't know what went in that category. ⁓ so then I will if we're in QuickBooks or some easy program, I might double click and let's see. ⁓ if not, part of their homework is go find out what goes in that category. ⁓ Sometimes, you know, we're looking at numbers and you'll see that, let's say for this month it's 3,000, 3,000, 3,000, you'll see a blip for 20,000 and you'll go, what caused the blip? Well, they don't know what the category is. They don't know what's in it. They have no clue why it blipped up from 3,000 consistently to 20. Well, that should be like a big red flag and they're not looking at it for that. So they are looking, but they're not knowing and understanding, putting those numbers to action.
Jelani Gonzalez: it comes to success, everybody's got their own definition of it, obviously. It's a subjective thing. But I'm curious, when you are working with a client, how you seen them define that success? Or how have you helped them to actually define what success will mean to them in their business?
Michele Williams: I think each person comes with their own kind of idea of what success is. know, people are... I've over my years, been doing this for a very long time. And sometimes what I see is their idea of success is proving something, proving they can start it, proving the first million, proving that they can work in some level of home or do some type of project. ⁓ Sometimes being published in a magazine that they to be published in. So some people come with those types of more exterior. Versions of what success looks like I've seen it where they can buy a house put in a pool Have a car so just all those things But usually once they've attained that they have to sit down and really redefine what success means to them because once you've got those First things that maybe show up with success. It's now what does success mean to me then what? What I try to help them do is ask them the big why question. What is it that you're trying to create in the world? What is it that you're trying to do? then it starts to become things like ⁓ really feel successful when my team can do something without me ⁓ when I can pour into other people. So their idea of success starts to grow outside of just how can I consume into that impact and legacy? What can I give back? ⁓ can I support? How can I help? That's where it gets really fun because Usually with that, the financial and all the other comes with it because they're pouring into other people and pouring into communities and into larger things. ⁓
Jelani Gonzalez: What's the difference between revenue and income? sure people confused it too. How do you clarify that for a client?
Michele Williams: So, know, think it varies. You can look at lot of P &Ls and sometimes revenue and income are going to say the same thing. It's money coming in the door. I see even a profit and loss statement. It's a P &L, it's a profit and loss, it's an income statement. And so I it's about knowing what the words mean for your company. So I've seen many where if you're looking at total revenue or total income versus gross... ⁓ and net, like looking at it all the way down a profit and loss statement. So to me, most of my companies, income and revenue are going to be the same thing. Gross is going to be, if you will, the revenue that is left over after the cost of the goods or the cost of the sale is taken out, gross profit. Then we're going have operating expenses and then net income or net revenue at the bottom of profit and loss statement. varies in nomenclature how people choose those words.
Jelani Gonzalez: Are there any non-negotiable boundaries you recommend or suggest to your client?
Michele Williams: I would say, know, non-negotiables are hard because you can always make a case for most things. ⁓ I would say one non-negotiable is you to keep up with your financials in some type of a system. So I'm a fan of like or similar to that you can put your financials in there and it can keep track of everything. I think a non-negotiable is not keeping track of your numbers. ⁓ First and foremost, just going to do your taxes is going to be a bear. That's going to be extremely difficult. second of all, you can't make decisions. ⁓ it's not just keeping up with them, but keeping things reconciled and up to date as much as possible. When look back on my first couple of years where I was focused more on the sales process and the delivery process than the financial order and operations behind my company, Sometimes I wasn't balancing my checkbook and doing all of that reconciliation for three to six months at a time. I was just so busy doing, looking at the bank account, seeing there was some money there and I just kept going. so that space that time, that lag creates a lot of problems that if you're not solving them quickly, they're compounding and you don't even know it. You not looking at it doesn't mean the problem's not happening. just means it could be compounding without you seeing it. So I do think there's a non-negotiable ⁓ not looking at keeping up with some structure order of the financials of your company.
Jelani Gonzalez: If there's an interior designer listening now that feels stuck or left behind, what's the first move they should make this week?
Michele Williams: I think just acknowledging that, you know, I think it's easy to stay stuck when we don't want to acknowledge it. There's a lot of shame, Jelani, around financials. I tried hard in my marketing to not, you know, a lot of times in marketing we're taught to find the problem and then you kind of like rub it in a little bit and make it worse and then solve it. I try not do that. Instead, I would rather come at it from an empowerment standpoint. that says the first step is to acknowledge that you need help with this or that maybe it was an area where you weren't taught, you were taught the delivery of your greatness but not the financials behind it. You can be taught that. so if you can acknowledge it, then you can reach out for help. They can certainly always reach out to me. They can reach out to their bookkeeper, their accountant, their financial advisor. ⁓ are plenty of resources around us that can support us for that area of our company. not acknowledging it and not looking at it is not going to solve the problem.
Jelani Gonzalez: Perfect. Michelle, as we wrap up, tell the audience how they can connect with you, listen to your podcasts and reach out to you.
Michele Williams: Sure, so podcast is called Profit is a Choice. And idea behind that is that every decision we make leads us towards or away from profitability. So you find that on Apple, Spotify, all the big platforms. I'm also on as Michelle Williams. You can also find me on Facebook as ScarletThreadConsulting. And you can find on Instagram as scarletthreadatl.
Jelani Gonzalez: Thank you, Michelle, we'll leave it there.
Michele Williams: Thank you.
Michele Williams: Yeah, I am a business coach and a consultant and work primarily in the interior design industry and that includes architects, builders, drapery workrooms, upholsterers, stagers, and interior designers. So it's a much larger industry than maybe we think out at the outset. And what I to do, I would say what ⁓ my secret weapon is ⁓ I help find maintain profitability. ⁓ I always say that there are three things that I want people that I work with to have when they walk away. I them to know and understand how to create a strategic plan or some type of a strategy. I want them to know how to read and understand their financials for decision making. And I want them to have a framework for decision making. Because to me, that's where that intersection, of strategy and finance, that's where the magic happens. Because if we've got a plan and no money behind it, it's very difficult. If we've got the money and no plan, then we're kind of running amok. But when we can get those two in alignment and really have them going in the same direction. Because if you think about it, strategy and finance touches every aspect of a business. There's not really a part that doesn't cost something. And see a lot of businesses that have a lot of great talent, but they're not thinking about how the business pieces fit together. ⁓ their marketing objectives might not match with their financial objectives, which might not match with their HR objectives.
Jelani Gonzalez: ⁓ you realize that, that it wasn't a creative or talent problem, but ⁓ strategy or business model problem?
Michele Williams: Yeah, I would say I probably recognized it around five to seven years ago prior to that. So I started my career working for a software company building financial software. And after I did that, I came home to raise my children and I started an interior design business, literally doing the work in interior design ⁓ realized that I either wasn't making money. ⁓ or I was making money but I wasn't sure where to spend it in the company. Like what do I do next? Do I hire? Do I grow? do I do here? Because very different to run with somebody else's plan and a corporation than to create your own plan and run with your own plan. And so I started figuring out putting the pieces together, other businesses started coming to me and going, what are you doing? How are you doing that? Well, I thought it was... The way that it presented was a financial problem. And so would come and I would teach them to read their P &L, teach them to read a balance sheet, ⁓ them what the numbers actually meant, just not how to see them on the page, but ⁓ to use those numbers for forward decision making. And they would come to me and I offered ⁓ a called CFO to Go, which is let me just show you how to read your numbers and then you go on your merry way, like you're not tied to me forever. The problem when I was reading their financials and helping them understand, the financials are telling us a story of everything that happened in the past. They're not telling us a story of everything happening in the future. so looking at the numbers through the lens of the past only gives us a piece of it. So then I would say, okay, here's where we are. Tell me where you want to go and let's see if the financials support it. They couldn't tell me. Not came me with a strategic plan, with a a written down ⁓ like this is with clarity where I want to go and what I'm trying to become as a business owner or as a small business. None them, it ⁓ didn't show up. And that's when I realized there was a big disconnect between the marketing that they were doing and the financials that they had and the business they were trying to create because they didn't have it codified anywhere.
Jelani Gonzalez: are some of symptoms that you see?
Michele Williams: Yeah, so I would say some of the symptoms are things like I have all this money sitting in a bank account and I don't know how to spend it. So sometimes it wasn't because sales and marketing didn't work. It's because it was working really well, but they didn't know which part is mine, which part is the client's. They didn't know what are the things that I've promised to do with that money. So the bank account's getting larger and larger and they don't know what can come in. that they can still breathe about thinking I'm going to be taxed on it or whatever. Or would conversely get the, I'm working all the time, but I'm not making what I need to make. I don't see where the money's coming in. Or I have a real marketing plan, but I've got to go market. I need to show up. And I would say, what is it that you're, who are you trying to bring in? What are you trying to accomplish? What are you to get to? And they couldn't answer the question. So then I would. back it up and say, then who are you going to get to take them where you don't know where you want to go? Like, how does that work? And they just didn't matter. They couldn't answer it. They could answer a piece. Like, I want type of project. OK, so you want how many of those projects? One or seven. Do you want to grow a team or do you want to keep the team small and boutique? What is it that you want? And you press, press, press, I could get pieces of the answer. But they had never sat down and just thought through where they wanted to go. They were so kind of encumbered by the weeds of the business of the today that they couldn't see where they wanted to go in the future. then any financial plan, I mean, how do you build the financial plan or a marketing plan or an operations plan if you don't know where you're going? The best that you can hope for is to solve a today problem.
Jelani Gonzalez: reading. your website I came across something called pricing for profit. What's that what's pricing profit?
Michele Williams: Well, I also recognized in a very creative industry, which interior design is, it's very difficult if we are only pricing for the commodity or for the cost of goods or for the product. We're not literally thinking about what is it that we need the business to do for us. I always ask the question. ⁓ you're working in this business, so let's identify what you're doing for the business, but let's also identify what does the business need to do for you. so if we need the business to pay off debt, if we need the business to have for capital improvement or for the future, that money only comes from the profits. And so we're only pricing to break even, we're not going to be profitable. We have to price for the future. We have to price for what the business is going. We have to price in a way we can, you know, take care of the bills of today and have some leftover to do the planning for future. And many people weren't doing that. It's almost they were afraid to price or they hadn't even thought about pricing for profits. You're not even to believe this, but early on, I remember people saying to me, why am I, if I'm getting paid, why do I ⁓ price for profit and I had to explain to them to have a sustainable business. The business has to make more than just paying today's bills that was like a novel concept to them.
Jelani Gonzalez: were some of the pricing myths ⁓ would come across, for example, in those conversations?
Michele Williams: think a lot of people thought because they were having to, that was an idea that they were creating in their mind. They found much more difficult price than if they bought a product. ⁓ Like if I a desk for somebody, I knew how much to mark that up, right? Because the market kind of tells you how to mark that up. You can look at an MSRP, you can gather information on a hard product, an idea is so much more difficult to so a lot of people were struggling with the pricing of an idea or the pricing of a concept or the pricing of a design or of a thought. And so really trying to help them step back and look at what is the transformation that is happening, ⁓ The same as in coaching, we're doing the same thing. What is the transformation that I'm helping provide to you and your team versus the three to five minutes that I'm spending with you or 30 minutes or hour or whatever that might be. Meaning we're not just pricing our time. And I think that was the big piece that a lot of them were missing. Also, understanding that they could price what the around them and the market around them allowed. ⁓ so my clients that are in one part of the world or one part of the country, ⁓ may have a different pricing scheme than somebody else. Just making sure that they were covering all of the costs that were involved. It's almost like many them were absorbing cost at the beginning. that they didn't need to absorb. They needed to put back into the cost of the product. And they just didn't understand how those pieces fit together. Especially when you're starting a small business or micro business. to be honest, of these people started, many people in a very creative business, you can look at artists, you can look at photographers, you can look at designers, a lot of those businesses that are creative in nature, they have strong business backgrounds. That's not what they studied. That's not You know, not that they can't do it. They absolutely can't. It's just they're not as familiar with that. They're more familiar with the work of their artistry or the work that they are producing. And so they come at pricing and business little differently than somebody who has ⁓ finance or an economics background. They're going to come up at it very, you know, I would say linearly, logically, this plus this equals that where the others don't feel that way. That's just not how they attack it. And so really helping them mix that, creative brain and then that logical financial brain so that they can put a price tag on what they are creating. I mean, that's a sweet spot. I love that. Because then they start to see the worth of what it is they're doing separate from them as a person.
Jelani Gonzalez: If I come to you for help and I say, hey, I'm really busy in my business, but my bank account doesn't show it, what's your diagnosis checklist? Like, how do you diagnose my problem?
Michele Williams: Yeah, so the first thing I'm going to say is let me see your profit and loss statement and your balance sheet for the last couple of years. And I want to see them in a cash basis and I want to see them in an accrual basis. Because I want to see what's happening daily, like cash in, cash out. I want to be able to see what cash flow looks like. I want to see the promises, like the promise of work to come that we would see in an accrual or the promise of the bills that we're going to be paying. I'm going to start there. ⁓ Then I'm going to ask you, especially if you are an interior designer or you're on the very creative side, I'm going to say, let me see your time tracking reports. I want to see where your time is going. What are you spending your time on? then we're going to start walking back and I'm going to start looking at what are the cost of goods? You know, what is it that it's costing you to produce whatever it is you're producing? ⁓ are the cost of your expenses? ⁓ then how are you charging? How much are you charging? How much are you working? Because usually a couple of things happening. Either there is pricing problem or a spending problem. And I've got to figure out which one it is. Because if you're so, so busy and not making enough, you're either not charging enough or you're overspending for what you're doing or combo of the two. So we've just got to kind of diagnose, this a, Jelani is working all the time, but he's giving half his time away for free problem? Or is working all the time and he's just charging or he's charging charging perfectly, but he's out here buying the things that he probably doesn't need to buy out of the business. And I've seen both sides of it.
Jelani Gonzalez: One of my mentors used to always say, always know your numbers. should always know your numbers. What the numbers you would suggest for a design business person that they should track either weekly or daily or monthly? ⁓
Michele Williams: So a couple, I think it's always important to know what we call your monthly nut. So what are the operational expenses that need to be paid every month, right? And a lot of times you can take that if you just did like some quick averages, you could look at the past year and look at your total operational expenses, divide it by 12 and just say on average our expenses are 35,000 a month. Well, then you know that I need to be bringing in enough money to cover the 35,000 a month. So I think that's really important. is, think it's important to understand revenue you're trying to hit. And I like to look at it yearly, quarterly, and monthly. Some companies, may even drive it down to weekly and daily based on the cadence of what you're doing. It's important to your gross profit margins. Because if you understand your gross profit margin, then you can also understand your cost of goods margin. ⁓ So if I how much of every dollar that comes in my company, goes out to complete the sale through cost of goods or cost of sales. I know how much is left and what we would call real revenue in a profit first world or gross profit. That's the money we have to run the company and that's the money we have that funds the net profit for us to have all the extra things that we want, the sustainability. So to me, if I know revenue, cost of goods and gross profit, then if I have a good idea of that monthly net expenses, I can just about parse out anything else that I need to from there.
Jelani Gonzalez: Is there one cash flow decision that would probably feel really uncomfortable for the business owner that would have an immediate impact on their cash flow?
Michele Williams: Well, ⁓ flow is interesting, right? Because they say cash is king, and it's true. Cash the thing that keeps the business running. It is the lifeblood, which is why we always are looking at sales sales once the next sale coming in. But the thing about cash flow is it's not does the cash flow, but does the cash flow at the right time. And so I a lot of it comes down to being familiar. with the cash flow in your company, not just the amount that's coming in, but the timing of things. quickly, and when do you consider something cash that you can spend? For example, in design, people sometimes are taking really big upfront payments that have to last for 12 months because they're building a house for you. They're doing these things for you. ⁓ So not that. because you give me $100,000 on March the 5th that I get to go spend all that money. I might have gotten the cash to flow in, but I can't actively use that cash. I have to parse it out over the months or using milestones or something. So it's not even just understanding cash flow, it's understanding the timing of it and revenue recognition so that I know, and that's very uncomfortable because it's much easier to say you gave me $100,000, I have $100,000. But some of that 100,000, I really can't even recognize until December because I've not done the work. work is still sitting out there. ⁓ it's not just the money coming in, but it's when the money available for use? ⁓
Jelani Gonzalez: back to what we talked about earlier in pricing for profits, how do you code somebody to handle discount pressure?
Michele Williams: Yeah, so true. You know, I used to hate the term, well, can you sharpen your pencil on that? Like I just, I it just like I can feel some kind of way when they say that. And my comment usually something along the lines, I sharpened my pencil before I got here. In other words, a discount, we have ask the question, what are they really asking? And what am I willing to do? And most of the companies I work with,
Jelani Gonzalez: Brilliant.
Michele Williams: I'm not encouraging discount behavior because once you discount, you now have taught them to ask for the discount and every person that they go tell about you, Jelani is so awesome, you've got to go work with him, but make sure you ask him for a discount and he'll give it to you. So you've now created this method of behavior that's probably not serving you in the long run. So when somebody says to me, you know, do you offer any discounts? My answer is usually along the lines of no, but if there's something that you would like to remove to get within your budget, tell me what your budget is and let's see what we can change, delete, you know, work with to get you within a budget that is more comfortable for you.
Jelani Gonzalez: That's brilliant. I love it. had a mentor used to always say the same thing that he doesn't discount his prices. He's allergic to free. ⁓ it's a question of value, he will increase the value so that the price is more justified because he never offers everything in one fell swoop. So right with you. I completely understand what you're going for.
Michele Williams: I love that. and the thing that I love about that is sometimes the things that they're asking for, you can make small tweaks and you can actually change the amount, you will, larger than the changes that you made, but they don't know that. ⁓ So like to just associate a discount with a loss of something. Like you don't get it just because you asked. And so, ⁓ but know what? I will say this. I think sometimes when we start off,
Jelani Gonzalez: Mm-hmm. Right. Exactly.
Michele Williams: by saying my goal is to give you the best price possible, that that is under my company brand, like this is the lowest level of quality or service that I'm willing to stake my brand reputation on, and you've built that trust factor with the client, then they're not necessarily, they don't necessarily want a discount, because that might mean lower quality, lower value. So you've already kind of got an agreement on. the value and the quality. then the price to me becomes tertiary. think that whenever you are in a pricing situation and price comes first, it's to be a fight because they're price buyers. I want and value buyers that then have the price associated a certain level of quality and value because now we are having a completely different conversation.
Jelani Gonzalez: Perfect. If you're consulting with a business and they're stuck, is there a typical bottleneck or a place that you immediately start to examine or is this just all random?
Michele Williams: Yeah, I love the fix this next kind of framework, Mike McCallowitz. what it says is if you think of business like this triangle, like a hierarchy, ⁓ starts with sales. So I'm looking to see, we have a sales problem? Like, is this money coming in the door? ⁓ that, we look at profitability. ⁓ if I've got sales, am I making money? Am I profitable? After that, I'm going to look at order. So we've got money coming in the door sales, we have profits. do we have a structure problem or a process problem? Because sometimes as the businesses grow, the processes we had don't support that growing business. After then we're looking at things like impact and legacy. What are we doing for the community? What are we doing for the world? Are we able ⁓ to this management turn? Is my problem that I want to retire and there's nobody behind me to bring up to sell the company to? ⁓ So I'm really looking at those five areas. What does the sales process look like? What do profits look like? What type of SOPs and do you have written? ⁓ is it that you're trying to create with your vision? So that strategy of impact. And then what is it that you're trying to get out of this? And then we can dial in from there.
Jelani Gonzalez: And then up, when you think about profitability, what's faster to get there? Is it raising prices ⁓ or tightening on operations?
Michele Williams: Yes and yes. they go together, right? To I'm looking for the quick wins though, because anytime we can get a quick win, it kind releases an endorphin and we want to go back and try to get the next quick win. So the first thing I'm going to do is say, let's look at your operating expenses and see if there's anything happening that we can trim. Is there anything that we can change? Is there anything that we can do? ⁓ Because sometimes some real low lying fruit right in there that we can just... get out of there and that quick win. The next thing I'm gonna do is I'm gonna start looking at your buying power. Let's look at your cost of goods sold. What is it costing you to get that product into the hands of the consumer? And are you paying too much to do that? So if I can reduce those two expense categories in some way, you're get an initial bang. Then we're start looking deeper and we're gonna start looking at what does your pricing look like? Do we need to raise rates? Raising rates with higher cost of goods. We're just chasing ourselves I'd rather keep the rates and lower the cost to deliver and so it I'm going after expenses to get some quick wins and then we're gonna start looking I mean we're even gonna be looking at salaries, right? Do we have the right people in the right seats? And are we paying them the right amounts? What do we need to increase and decrease? But yeah, I'm gonna probably do a little bit of both right there together
Jelani Gonzalez: What's the, reflecting on you personally now, what's the hardest lesson that you've learned that you now teach to people that you consult with and you teach that with conviction because you know it will have an incredible impact on them?
Michele Williams: I think it goes back to something you said a minute ago that I think you said your mentor told you and that's know your numbers. You know, the reason that I do all of this and just transparency is I started my business back in 2000 and by 2002, 2003, I had a negative net profit. And I realized that I was so focused on the delivering of the product and service. I wasn't as focused on taking care of the business. so that whole, you know, put on your own mask first. I wasn't asking as much of the business as it had the opportunity to provide for me. I asking it for the full salary that I needed it to replace from my corporate ace. I wasn't asking it to give me profitability in 401ks retirement plans. I just wasn't asking it of it. And so when started realizing what I needed from, if I wasn't going to do it, and I couldn't create it in the business, I was gonna go back to corporate because I could make the money there. I really wanted to do what I was doing and there had to be a way. And only way to do that was to know my numbers. So the first thing I'm gonna say is know them, but when I say know them, here's what a lot of people do. I've seen this over and over. They get profit and loss statement, they get that balance sheet, they get that report from their bookkeeper accountant, they glance at and they will say, know it. Knowing it is different than looking at it. So knowing it is knowing what the number is, knowing what the number represents, and knowing how the number in relationship to the other numbers around it. That's knowing. It's a understanding than visually at something. ⁓ And I think lot of people hear that know your numbers and they visually look, but they don't know what to do with it. ⁓ So if you close gap, so that you know what it is, that's when you start asking the questions about strategy. Because now I know what the numbers are, I know what they mean, and I know how they work in relationship. Well, now I want a different outcome, so now how do all these things converge to get me to the new outcome?
Jelani Gonzalez: That's very true. One of the people that I read his biography, Reginald Lewis, he used to talk about when you look at numbers on a sheet, you have to know what's behind that number. Like, what does that number actually represent? Because then that should tell a story. It's not just a number on the page, obviously. Yeah, so. ⁓
Michele Williams: That's exactly it. That's exactly like so much so that when I'm looking at a profit and loss statement, we're going line by line. I mean, we're on a zoom call and we are going line by line and I'm asking them what makes up that number. I'll tell you many cannot tell me they're looking at it every month, but they don't know what went in that category. ⁓ so then I will if we're in QuickBooks or some easy program, I might double click and let's see. ⁓ if not, part of their homework is go find out what goes in that category. ⁓ Sometimes, you know, we're looking at numbers and you'll see that, let's say for this month it's 3,000, 3,000, 3,000, you'll see a blip for 20,000 and you'll go, what caused the blip? Well, they don't know what the category is. They don't know what's in it. They have no clue why it blipped up from 3,000 consistently to 20. Well, that should be like a big red flag and they're not looking at it for that. So they are looking, but they're not knowing and understanding, putting those numbers to action.
Jelani Gonzalez: it comes to success, everybody's got their own definition of it, obviously. It's a subjective thing. But I'm curious, when you are working with a client, how you seen them define that success? Or how have you helped them to actually define what success will mean to them in their business?
Michele Williams: I think each person comes with their own kind of idea of what success is. know, people are... I've over my years, been doing this for a very long time. And sometimes what I see is their idea of success is proving something, proving they can start it, proving the first million, proving that they can work in some level of home or do some type of project. ⁓ Sometimes being published in a magazine that they to be published in. So some people come with those types of more exterior. Versions of what success looks like I've seen it where they can buy a house put in a pool Have a car so just all those things But usually once they've attained that they have to sit down and really redefine what success means to them because once you've got those First things that maybe show up with success. It's now what does success mean to me then what? What I try to help them do is ask them the big why question. What is it that you're trying to create in the world? What is it that you're trying to do? then it starts to become things like ⁓ really feel successful when my team can do something without me ⁓ when I can pour into other people. So their idea of success starts to grow outside of just how can I consume into that impact and legacy? What can I give back? ⁓ can I support? How can I help? That's where it gets really fun because Usually with that, the financial and all the other comes with it because they're pouring into other people and pouring into communities and into larger things. ⁓
Jelani Gonzalez: What's the difference between revenue and income? sure people confused it too. How do you clarify that for a client?
Michele Williams: So, know, think it varies. You can look at lot of P &Ls and sometimes revenue and income are going to say the same thing. It's money coming in the door. I see even a profit and loss statement. It's a P &L, it's a profit and loss, it's an income statement. And so I it's about knowing what the words mean for your company. So I've seen many where if you're looking at total revenue or total income versus gross... ⁓ and net, like looking at it all the way down a profit and loss statement. So to me, most of my companies, income and revenue are going to be the same thing. Gross is going to be, if you will, the revenue that is left over after the cost of the goods or the cost of the sale is taken out, gross profit. Then we're going have operating expenses and then net income or net revenue at the bottom of profit and loss statement. varies in nomenclature how people choose those words.
Jelani Gonzalez: Are there any non-negotiable boundaries you recommend or suggest to your client?
Michele Williams: I would say, know, non-negotiables are hard because you can always make a case for most things. ⁓ I would say one non-negotiable is you to keep up with your financials in some type of a system. So I'm a fan of like or similar to that you can put your financials in there and it can keep track of everything. I think a non-negotiable is not keeping track of your numbers. ⁓ First and foremost, just going to do your taxes is going to be a bear. That's going to be extremely difficult. second of all, you can't make decisions. ⁓ it's not just keeping up with them, but keeping things reconciled and up to date as much as possible. When look back on my first couple of years where I was focused more on the sales process and the delivery process than the financial order and operations behind my company, Sometimes I wasn't balancing my checkbook and doing all of that reconciliation for three to six months at a time. I was just so busy doing, looking at the bank account, seeing there was some money there and I just kept going. so that space that time, that lag creates a lot of problems that if you're not solving them quickly, they're compounding and you don't even know it. You not looking at it doesn't mean the problem's not happening. just means it could be compounding without you seeing it. So I do think there's a non-negotiable ⁓ not looking at keeping up with some structure order of the financials of your company.
Jelani Gonzalez: If there's an interior designer listening now that feels stuck or left behind, what's the first move they should make this week?
Michele Williams: I think just acknowledging that, you know, I think it's easy to stay stuck when we don't want to acknowledge it. There's a lot of shame, Jelani, around financials. I tried hard in my marketing to not, you know, a lot of times in marketing we're taught to find the problem and then you kind of like rub it in a little bit and make it worse and then solve it. I try not do that. Instead, I would rather come at it from an empowerment standpoint. that says the first step is to acknowledge that you need help with this or that maybe it was an area where you weren't taught, you were taught the delivery of your greatness but not the financials behind it. You can be taught that. so if you can acknowledge it, then you can reach out for help. They can certainly always reach out to me. They can reach out to their bookkeeper, their accountant, their financial advisor. ⁓ are plenty of resources around us that can support us for that area of our company. not acknowledging it and not looking at it is not going to solve the problem.
Jelani Gonzalez: Perfect. Michelle, as we wrap up, tell the audience how they can connect with you, listen to your podcasts and reach out to you.
Michele Williams: Sure, so podcast is called Profit is a Choice. And idea behind that is that every decision we make leads us towards or away from profitability. So you find that on Apple, Spotify, all the big platforms. I'm also on as Michelle Williams. You can also find me on Facebook as ScarletThreadConsulting. And you can find on Instagram as scarletthreadatl.
Jelani Gonzalez: Thank you, Michelle, we'll leave it there.
Michele Williams: Thank you.