E20: Making Profitable Decisions with Melissa Houston

Erin Austin: 00:01:06

Hello everyone.

Erin Austin: 00:01:08

Welcome to the Hourly Exit podcast.

Erin Austin: 00:01:11

I am so excited to have Melissa Houston with me here today.

Erin Austin: 00:01:14

Thank you for joining me, Melissa.

Melissa Houston: 00:01:16

Hi, Erin.

Melissa Houston: 00:01:17

Thank you so much for having me.

Erin Austin: 00:01:19

Well, Melissa and I have known each other for a while.

Erin Austin: 00:01:21

I've had the pleasure of being on her podcast as well, so I'm super excited

Erin Austin: 00:01:26

to have her here to talk to you about all things financial health, but first

Erin Austin: 00:01:31

I'm gonna let Melissa, I'm gonna let you introduce yourself to the audience.

Melissa Houston: 00:01:34

Oh, great.

Melissa Houston: 00:01:34

Okay, so my name is Melissa Houston.

Melissa Houston: 00:01:36

I am a cpa, which means I'm a certified professional accountant.

Melissa Houston: 00:01:40

I have been working in this field for over 20 years, and essentially

Melissa Houston: 00:01:45

I help business owners maximize the profit in their business so that they

Melissa Houston: 00:01:50

can keep more money for themselves and increase their net worth.

Melissa Houston: 00:01:54

So I try to take the fear out of managing the money in your business and really

Melissa Houston: 00:01:58

help you to optimize that profit.

Erin Austin: 00:02:01

Yeah, so important and I wanna mention, Melissa did not mention

Erin Austin: 00:02:05

that she's a columnist with Forbes,

Melissa Houston: 00:02:07

Oh yeah, I'm a little humble

Erin Austin: 00:02:09

Yeah.

Erin Austin: 00:02:10

You know, I had to go there cause very impressive.

Erin Austin: 00:02:13

So, you know, Forbes is one of my favorite sources, uh, to find information about

Erin Austin: 00:02:17

Mackenzie Scott, who's, you know, my, you know, spirit idol and, uh, and the

Erin Austin: 00:02:22

love, the charitable giving that she's

Melissa Houston: 00:02:24

Yeah, she's doing great.

Erin Austin: 00:02:25

Yeah.

Erin Austin: 00:02:26

Just so amazing.

Erin Austin: 00:02:27

But I know audience would love to hear about how you're able to land that gig.

Melissa Houston: 00:02:32

Yeah, well, you know, ironically enough, people think that

Melissa Houston: 00:02:34

it's who you know, and, you know, it really wasn't that case for me.

Melissa Houston: 00:02:38

I cold pitched them and I got a call.

Melissa Houston: 00:02:41

Um, I mean, it really was as simple as that.

Melissa Houston: 00:02:44

And I wish there was like this big secret that I could offer people, but you know,

Melissa Houston: 00:02:49

it's, it's really about being the expert in your field and putting it out there.

Erin Austin: 00:02:54

Yeah, you gotta get out there and, uh, yeah, we, we are all

Erin Austin: 00:02:57

experts and, uh, and there's information we have that would be very valuable to

Erin Austin: 00:03:01

other people, and we need to share it.

Melissa Houston: 00:03:03

Exactly.

Erin Austin: 00:03:04

That's fantastic.

Erin Austin: 00:03:06

So you describe yourself as a business finance coach.

Erin Austin: 00:03:09

Tell me what that means and how you help people.

Melissa Houston: 00:03:12

Yeah, so a business finance coach is kind of like the

Melissa Houston: 00:03:15

intermediary person between, your tax accountant and if you're a small to

Melissa Houston: 00:03:20

medium size business who's not quite ready for a CFO in your business.

Melissa Houston: 00:03:24

Business finance coach is me, and what I do is I help create

Melissa Houston: 00:03:30

profitability in your business.

Melissa Houston: 00:03:32

So typically clients come to me with the frustration of not really

Melissa Houston: 00:03:35

understanding their numbers in their business and knowing that they wanna

Melissa Houston: 00:03:39

create wealth but not sure how to do it.

Melissa Houston: 00:03:41

So what we do is essentially we figure out where they're at financially in their

Melissa Houston: 00:03:47

business and talk about their financial goals, where they wanna be 12 months from.

Melissa Houston: 00:03:52

Five years from now, 10 years from now, and we do a financial plan that's

Melissa Houston: 00:03:56

according to what their goals are.

Melissa Houston: 00:03:58

And what essentially that financial plan is, is it maps out each and every month

Melissa Houston: 00:04:03

what your goals are and these are the goals that you need to meet each and

Melissa Houston: 00:04:07

every month or exceed, and 12 months later, you should be achieving your goals.

Melissa Houston: 00:04:12

But it's not like a a, you know, start and stop thing.

Melissa Houston: 00:04:15

You should always have this financial plan in place for your business.

Melissa Houston: 00:04:18

And then when you have that financial plan, you also monitor your results

Melissa Houston: 00:04:24

against that plan each and every month.

Melissa Houston: 00:04:26

So you understand if you hit your profit targets for the month.

Melissa Houston: 00:04:30

Because often what happens is business owners,

Melissa Houston: 00:04:33

they may have an idea where they want to go, they may not have made a plan.

Melissa Houston: 00:04:37

So I always say a goal without a plan is just a wish.

Melissa Houston: 00:04:40

And if you don't get that goal down on paper or in Excel or you

Melissa Houston: 00:04:45

know, however the term is these days, It's likely not gonna happen.

Melissa Houston: 00:04:49

You need to make yourself accountable to your goals, and while you're doing

Melissa Houston: 00:04:53

that, when you map out these goals, you are also finding ways to increase

Melissa Houston: 00:04:57

that profitability in your business,

Melissa Houston: 00:04:59

you have all the moving parts mapped out, and you just ensure that each and

Melissa Houston: 00:05:03

every month you're meeting your targets.

Melissa Houston: 00:05:05

So that you are optimizing profit in your business.

Melissa Houston: 00:05:07

Now, I also teach how to manage cash flow and, you know, internal controls

Melissa Houston: 00:05:12

and all sorts of other things that small businesses are, are up against that,

Melissa Houston: 00:05:15

we don't know where to go to get this help, but it's so essential.

Melissa Houston: 00:05:19

And ultimately the goal is increase the profit so that

Melissa Houston: 00:05:23

it increases your net worth.

Melissa Houston: 00:05:25

Because as small business owners, chances are you own

Melissa Houston: 00:05:27

your business a hundred percent.

Melissa Houston: 00:05:29

So that is a financial asset.

Erin Austin: 00:05:31

Right.

Erin Austin: 00:05:32

So two things.

Erin Austin: 00:05:33

One is, so you are a cpa, but in this role, you're not acting as

Erin Austin: 00:05:39

your cpa, they're using a separate tax accountant or, or is that?

Melissa Houston: 00:05:43

Exactly, Yes.

Melissa Houston: 00:05:44

So because I am Canadian and in order to practice in Canada and the

Melissa Houston: 00:05:50

US, I would need to be licensed in each and every province and state.

Melissa Houston: 00:05:56

to do taxes and I just don't have that bandwidth.

Erin Austin: 00:05:59

Yeah, and there are other people who can do it, so...

Melissa Houston: 00:06:03

Yeah, And I don't love taxes enough to specialize in it.

Melissa Houston: 00:06:07

So what I do is I help my clients by working with their cpa, their

Melissa Houston: 00:06:10

tax accountant, who is going to give those tax saving strategies to

Melissa Houston: 00:06:15

help optimize the profit as well.

Melissa Houston: 00:06:17

So they have their tax accountant in the state that they're in, or the province

Melissa Houston: 00:06:21

if they're Canadian and we work together.

Melissa Houston: 00:06:24

And ensure that they are taking advantage of the privileges that

Melissa Houston: 00:06:28

you have as a business owner when it comes to the income tax act.

Erin Austin: 00:06:31

Okay.

Erin Austin: 00:06:32

Gotcha.

Erin Austin: 00:06:33

And then the other is you use the term financial plan.

Erin Austin: 00:06:36

You didn't use the term financial planner, which I associate with like

Erin Austin: 00:06:40

the person who helps you get your retirement and that kind of stuff.

Erin Austin: 00:06:43

And so couple of the difference between the financial plan versus

Erin Austin: 00:06:46

what a financial planner does.

Melissa Houston: 00:06:48

Yeah, so that's a really good question and I

Melissa Houston: 00:06:51

love how you picked up on that.

Melissa Houston: 00:06:52

So, financial plan is a combination of a budget and an operating forecast.

Melissa Houston: 00:06:57

So these are accounting terminologies, right?

Melissa Houston: 00:06:59

And I tend to stay away from them because it can sound a little scary

Melissa Houston: 00:07:02

to some people and they're like, I don't wanna get involved in that.

Melissa Houston: 00:07:06

But what it is, is it's looking at where you are at in your business

Melissa Houston: 00:07:10

and planning out where you wanna take your business to, right?

Melissa Houston: 00:07:13

So you're looking at the financial plan in the sense of how much money

Melissa Houston: 00:07:16

you wanna earn, how much profitability, if you can increase your profit

Melissa Houston: 00:07:20

margins, all sorts of stuff like that.

Melissa Houston: 00:07:22

And a financial planner is the designated person who helps you invest your money.

Melissa Houston: 00:07:29

So if you were at the stage in your business where you've hit your growth

Melissa Houston: 00:07:34

target, you're at your sweet spot and you've got all this extra money that

Melissa Houston: 00:07:37

you need to invest, this is where you would consult not only a CPA, but a

Melissa Houston: 00:07:41

financial planner to start investing, and the CPA's there to help you with

Melissa Houston: 00:07:46

the tax saving strategies for personal investing as well, and business.

Melissa Houston: 00:07:51

And your financial planner,

Melissa Houston: 00:07:52

probably if you pick a good one, we'll probably know all the tax rules and such,

Melissa Houston: 00:07:57

and basically, you work together as a team to ensure that you are protecting

Melissa Houston: 00:08:02

your financial assets and growing them and getting your money working for you.

Erin Austin: 00:08:07

Got it.

Erin Austin: 00:08:07

Okay.

Erin Austin: 00:08:08

Very good.

Erin Austin: 00:08:09

So you mentioned that, uh, small business owners, they, they need this help,

Erin Austin: 00:08:14

but they don't know where to find it.

Erin Austin: 00:08:15

I assume when you kind of entered this, well, first of

Erin Austin: 00:08:18

all, are you a corporate refugee

Melissa Houston: 00:08:20

Yes, absolutely

Erin Austin: 00:08:21

Okay.

Melissa Houston: 00:08:24

And that's why I went into business for myself,

Melissa Houston: 00:08:26

because I knew this was lacking.

Melissa Houston: 00:08:29

I've worked in corporate, I've worked in public accounting firms, and whether I'm

Melissa Houston: 00:08:33

working with business owners or project managers, I see the same thing where

Melissa Houston: 00:08:37

people don't understand their business numbers, and when you understand your

Melissa Houston: 00:08:41

business numbers, that helps make you the best business owner that you can

Melissa Houston: 00:08:46

be, because what you're doing is you're making profitable business decisions

Melissa Houston: 00:08:50

every single day instead of relying on your accountant who you probably

Melissa Houston: 00:08:55

see once a year, and really isn't all that invested in your business.

Melissa Houston: 00:08:59

I always say nobody's gonna care about your business as much as you do, so you

Melissa Houston: 00:09:02

need to get familiar with your numbers.

Erin Austin: 00:09:05

Yeah.

Erin Austin: 00:09:05

Well, well let's, let's jump into that then.

Erin Austin: 00:09:08

So, in a lot of service providers, you know, we think in terms of

Erin Austin: 00:09:12

income, which is, you know, many of us are corporate refugees.

Erin Austin: 00:09:15

We think in terms of income, we have that kind of post corporate mentality.

Erin Austin: 00:09:19

And if we're going to think about ourselves as CEOs of our

Erin Austin: 00:09:23

business business owners, we need to kind of think beyond income.

Erin Austin: 00:09:27

So there are a couple of terms that are related, but different

Erin Austin: 00:09:29

that I think people sometimes use interchangeably cuz they don't

Erin Austin: 00:09:32

understand the different nuances of them.

Erin Austin: 00:09:34

But those are revenue, profit, and income.

Erin Austin: 00:09:37

And can you just kind of tell us the differences and

Melissa Houston: 00:09:40

I love this question.

Melissa Houston: 00:09:41

This is such an important question because often what we hear as business

Melissa Houston: 00:09:45

owners is if we're having cash flow problems, what do people usually tell us?

Melissa Houston: 00:09:50

Go make more money, right?

Melissa Houston: 00:09:52

So that's the revenue.

Melissa Houston: 00:09:53

And the thing is, revenue is important.

Melissa Houston: 00:09:55

You absolutely need revenue in your business, but if you're not generating

Melissa Houston: 00:09:59

profit, which is what you get to keep as a business owner at the end of the day,

Melissa Houston: 00:10:04

then it's a red flag for your business.

Melissa Houston: 00:10:06

So revenue, yes, it's important, but you don't need to generate more

Melissa Houston: 00:10:10

revenue if you've got money leaks.

Melissa Houston: 00:10:12

You have to go in and fix your money leaks.

Melissa Houston: 00:10:14

You have to go in, know your numbers, know where you can increase profit,

Melissa Houston: 00:10:18

check your pricing structure.

Melissa Houston: 00:10:19

There's all sorts of things that you need to do before you just go

Melissa Houston: 00:10:23

out and make more money, right?

Melissa Houston: 00:10:24

Because if you're making more money, it's just like being on a hamster wheel.

Melissa Houston: 00:10:27

The problem is still gonna be there.

Melissa Houston: 00:10:29

You're still gonna be cash poor at the end of the month and

Melissa Houston: 00:10:31

wondering where all your money went.

Melissa Houston: 00:10:33

So profit is revenue, less expenses.

Melissa Houston: 00:10:37

So all your expenses would be your, all your costs, all your overhead,

Melissa Houston: 00:10:42

and that includes paying yourself.

Melissa Houston: 00:10:45

So, so many times I see business owners who are not paying

Melissa Houston: 00:10:48

themself a regular salary.

Melissa Houston: 00:10:50

So that is definitely one thing we do in the financial plan where we include that.

Melissa Houston: 00:10:53

So you ensure that you're paying yourself what you need to pay

Melissa Houston: 00:10:56

yourself in order to meet your personal financial responsibilities.

Melissa Houston: 00:11:00

So then the essentially income, net income and profit, that's the same

Melissa Houston: 00:11:05

line in an income statement, right?

Melissa Houston: 00:11:07

So whether you're, you can use them interchangeably and profit income is

Melissa Houston: 00:11:12

what you get to keep as a business owner.

Melissa Houston: 00:11:14

So you can either reinvest into your business as you're growing your

Melissa Houston: 00:11:18

business, or you can invest in another ways to get your money working for you.

Erin Austin: 00:11:23

Okay.

Erin Austin: 00:11:23

Got it.

Erin Austin: 00:11:24

And so when we think about the service based business, you know, I.

Erin Austin: 00:11:30

Probably the lay person thinks of profit in product based business is, you know,

Erin Austin: 00:11:34

the revenue minus cost of good sold.

Erin Austin: 00:11:36

And we're trying to figure out what that expense is or cost of good sold

Erin Austin: 00:11:40

is in the expertise based business.

Erin Austin: 00:11:41

Do you start with what do you need to live or do you start with what the

Erin Austin: 00:11:45

market rate is for what you do like, Like what is the right way to think

Erin Austin: 00:11:49

about like what your cost of good sold is in an expertise based business?

Melissa Houston: 00:11:53

Yeah, so your cost of good sold is actually a little different

Melissa Houston: 00:11:55

from your overhead expenses, right?

Melissa Houston: 00:11:57

So for product based businesses, the cost of good sold is going to be all the direct

Melissa Houston: 00:12:01

costs going into creating that product.

Melissa Houston: 00:12:04

And then the overhead costs are your salaries and um, you know,

Melissa Houston: 00:12:08

advertising and dos and subscriptions and all that stuff, right?

Melissa Houston: 00:12:13

So when I first meet with clients, one of the steps that we take.

Melissa Houston: 00:12:18

Establishing what they need to earn at a minimum to pay their personal expenses.

Melissa Houston: 00:12:23

So we factor that into the financial plan.

Melissa Houston: 00:12:26

And then we work backwards in a way, cuz like what we do is we calculate all

Melissa Houston: 00:12:30

the monthly expenses that are coming in and then examine their pricing

Melissa Houston: 00:12:35

strategy, look at how their pricing, their products and services, seeing if

Melissa Houston: 00:12:39

we need to make any adjustments there.

Melissa Houston: 00:12:42

See if we need to reduce costs or increase rates or increase sales levels.

Melissa Houston: 00:12:46

And then we start planning out how much revenue they need to bring in in order

Melissa Houston: 00:12:51

to break even, and then in order to get to the net profit margins of their

Melissa Houston: 00:12:57

business that they want to achieve.

Melissa Houston: 00:12:59

So usually we base the net profit margins on what is happening in their industry.

Melissa Houston: 00:13:05

So for service based businesses, typically, 50% is a standard net profit

Melissa Houston: 00:13:11

margin, where in the restaurant bakery business, it would be eight to 10%.

Melissa Houston: 00:13:15

So it really varies from industry to industry.

Erin Austin: 00:13:18

Okay.

Erin Austin: 00:13:19

Gotcha.

Erin Austin: 00:13:20

And so that makes you, I mean, you're talking to them about their pricing, about

Erin Austin: 00:13:24

their business model, about everything,

Melissa Houston: 00:13:25

Exactly, and it can get very overwhelming.

Melissa Houston: 00:13:28

So that's why it's, it's very hands on.

Melissa Houston: 00:13:30

We're there to do it together and we create that plan.

Melissa Houston: 00:13:34

And, um, what happens after that is you monitor the plan.

Melissa Houston: 00:13:39

So then usually they check in with me every month to look at it together and

Melissa Houston: 00:13:44

compare what they actually did in that month versus what they had planned.

Melissa Houston: 00:13:48

And then we examine the variances and see if there's any problems that are

Melissa Houston: 00:13:52

surfacing that need to be fixed in order to, you know, plug money leaks.

Erin Austin: 00:13:57

Do you work mostly with service based businesses or

Erin Austin: 00:13:59

do you have different industries?

Melissa Houston: 00:14:01

I have a gamut of different industries.

Melissa Houston: 00:14:03

I love working with product based businesses, I love

Melissa Houston: 00:14:06

working with service based.

Melissa Houston: 00:14:07

Product based tends to be a little bit more detailed and complicated,

Melissa Houston: 00:14:10

so I love challenges, right?

Erin Austin: 00:14:12

right.

Erin Austin: 00:14:13

Right.

Erin Austin: 00:14:15

And all different.

Erin Austin: 00:14:15

That's great.

Erin Austin: 00:14:16

Now, the name of your business is,

Erin Austin: 00:14:18

, Melissa Houston: she means profit

Erin Austin: 00:14:20

I work with men and women.

Erin Austin: 00:14:21

I love working with women because women tend to have a lot of money mindset

Erin Austin: 00:14:26

issues where we have been told that we don't need to be wealthy or you know,

Erin Austin: 00:14:31

we just, you know, need as much as we need to get by, or that making money is

Erin Austin: 00:14:36

greedy and there's all sorts of baggage that we can carry about becoming wealthy.

Erin Austin: 00:14:41

And I really try to change that narrative in their head and just show women how.

Erin Austin: 00:14:49

We have the space, we have the capability, we have the brains, we have the ambition.

Erin Austin: 00:14:53

We have everything we need.

Erin Austin: 00:14:55

So it's okay to claim that wealth.

Erin Austin: 00:14:57

Yeah.

Erin Austin: 00:14:57

Yeah.

Erin Austin: 00:14:58

I mean, and at the end of the day, in the United States of America,

Erin Austin: 00:15:01

wealth means impact, right?

Erin Austin: 00:15:03

And so if we wanna have a voice, if we wanna make a difference, like it's

Erin Austin: 00:15:08

fairly difficult to do that wealth free.

Erin Austin: 00:15:12

And so the more wealth we have in the hands of women, You know, the more that

Erin Austin: 00:15:17

they are generous, like as we know from McKenzie versus, uh, her ex, uh, and,

Erin Austin: 00:15:22

uh, and that you can help your community, help your childrens sharing that wealth.

Erin Austin: 00:15:26

I mean, it's to look at it as the ways you can use it for good instead of

Melissa Houston: 00:15:31

There's so many great ways you can use wealth, right?

Melissa Houston: 00:15:35

And I love what you said, like, you know, Yes.

Melissa Houston: 00:15:37

Women definitely donate.

Melissa Houston: 00:15:40

We build charities, we build not for profits.

Melissa Houston: 00:15:42

Um, we.

Melissa Houston: 00:15:44

Set our kids up for education and set them up for a good future.

Melissa Houston: 00:15:48

There's generational wealth that can be passed down from generation to generation.

Melissa Houston: 00:15:52

There's so much we can be doing with wealth and there's so many good things.

Melissa Houston: 00:15:57

And you know, a, a lot of women fear that money will change them.

Erin Austin: 00:16:00

Dig into that for me.

Erin Austin: 00:16:01

Where does that come from?

Melissa Houston: 00:16:02

I'm not sure where it comes from.

Melissa Houston: 00:16:04

Maybe it's a lot of the childhood stories we're told and you know, we

Melissa Houston: 00:16:08

just play them back in our heads.

Melissa Houston: 00:16:10

But the thing is, I always say to them, Are you a good person now?

Melissa Houston: 00:16:13

And usually the answer is yes.

Melissa Houston: 00:16:16

So with money that can just.

Melissa Houston: 00:16:18

Have you be a not a better person, but like a bigger, more impactful person.

Melissa Houston: 00:16:22

On a bigger scale, you're still gonna be that good person if you're

Melissa Houston: 00:16:26

a jerk, it's just going to amplify the fact that you're a jerk if you

Melissa Houston: 00:16:31

got a whole bunch of money, right?

Melissa Houston: 00:16:33

So money doesn't change who we are, it just changes the

Melissa Houston: 00:16:36

opportunities that were given.

Erin Austin: 00:16:38

Right.

Erin Austin: 00:16:39

Yeah.

Erin Austin: 00:16:40

I wonder if it also, I mean if a woman is partnered with a man, if it

Erin Austin: 00:16:44

seems too competitive or that it's just, it will change the dynamic

Erin Austin: 00:16:50

within that relationship as well.

Melissa Houston: 00:16:52

Yeah, and that's a really good question because a

Melissa Houston: 00:16:54

lot of women fear that they fear making more than their partner.

Melissa Houston: 00:16:57

They fear making more than their parents.

Melissa Houston: 00:17:00

There's a lot of fear that comes with money.

Melissa Houston: 00:17:02

Money is a very emotional topic, right?

Melissa Houston: 00:17:05

But the reality is there's more and more women who are

Melissa Houston: 00:17:08

out earning their male spouses

Melissa Houston: 00:17:11

now, and it's just becoming a little bit more normalized and you

Melissa Houston: 00:17:17

know, hopefully 5, 10, 15 years down the road, it could be the.

Melissa Houston: 00:17:22

Or, you know, I, I don't know if equality will ever, a hundred

Melissa Houston: 00:17:27

percent be achieved, right?

Melissa Houston: 00:17:29

Cause there's always gonna be that balance, that scale.

Melissa Houston: 00:17:31

But I mean the equality in the sense that women can absolutely out

Melissa Houston: 00:17:36

earn their men and totally be okay.

Melissa Houston: 00:17:38

I mean, I'm in a relationship like that and I know my husband

Melissa Houston: 00:17:43

doesn't feel threatened by

Melissa Houston: 00:17:44

it.

Melissa Houston: 00:17:45

. Erin Austin: Right.

Melissa Houston: 00:17:45

He feels grateful,

Erin Austin: 00:17:47

Exactly.

Erin Austin: 00:17:48

Like what?

Erin Austin: 00:17:49

Where's the downside

Melissa Houston: 00:17:50

Yeah, and a lot of women have the, the dream

Melissa Houston: 00:17:55

of retiring their spouses too.

Melissa Houston: 00:17:58

You know, if their spouse is not, an entrepreneur themselves and

Melissa Houston: 00:18:02

they're in their jobs and they're miserable, you know, they want

Melissa Houston: 00:18:05

to help them get out of that.

Melissa Houston: 00:18:07

And there's absolutely nothing wrong with that.

Melissa Houston: 00:18:08

That's a gift.

Erin Austin: 00:18:09

Right, Exactly.

Erin Austin: 00:18:10

Yeah.

Erin Austin: 00:18:11

And for some of us, and certainly I started mine when I, uh, went out on

Erin Austin: 00:18:15

my own, it was definitely lifestyle oriented and I was not remotely thinking

Erin Austin: 00:18:20

about building an asset or it was very income oriented, kind of based on,

Erin Austin: 00:18:25

you know, what was I making when I was in house versus what I'm making now.

Erin Austin: 00:18:29

And my primary motivator was flexibility and making enough

Erin Austin: 00:18:35

to cover what I needed to cover.

Erin Austin: 00:18:36

Like that was a hundred percent of what I was doing.

Erin Austin: 00:18:40

You know, for me, the mindset issues weren't kind of those negative ones.

Erin Austin: 00:18:43

It was more of a understanding what it could be, like instead of

Erin Austin: 00:18:48

just being an income generator.

Erin Austin: 00:18:50

And so in that, until someone kind of tells you that you just

Erin Austin: 00:18:55

stay in that income mindset.

Erin Austin: 00:18:56

Like as I'm talking to women now and we talk about, you know, using our expertise

Erin Austin: 00:19:01

to create assets, it is very surprising to easily 90% of them, they never

Erin Austin: 00:19:07

thought about that as an asset builder.

Erin Austin: 00:19:09

so what are you seeing when you're talking, I mean, your, your podcast,

Erin Austin: 00:19:12

your, your columns, you're writing like, what are women thinking about?

Erin Austin: 00:19:16

Like what were they thinking?

Erin Austin: 00:19:17

Was it all news to them or,

Melissa Houston: 00:19:19

No, I would completely agree with you.

Melissa Houston: 00:19:21

Most of them are not thinking that it's an asset builder, but what I

Melissa Houston: 00:19:24

talk about all the time is how being a business owner is the fastest way

Melissa Houston: 00:19:29

to create wealth for yourself because your business is a financial asset.

Melissa Houston: 00:19:34

You have the, control to a certain extent how much money that you're

Melissa Houston: 00:19:37

bringing in each and every month, and you have control over the profit

Melissa Houston: 00:19:41

and you know, all the wealth building

Melissa Houston: 00:19:43

tools that come with being a business owner.

Melissa Houston: 00:19:45

But also I talk about, and I know obviously you do too,

Melissa Houston: 00:19:49

the exit strategy, right?

Melissa Houston: 00:19:51

You know, building that asset so that you can sell it one day.

Melissa Houston: 00:19:54

So not only just look at it as being an income producer, but being an asset

Melissa Houston: 00:19:58

that you can sell and you know, give yourself a nice little retirement nest

Melissa Houston: 00:20:02

egg or go on to build another business or whatever it is that you desire.

Erin Austin: 00:20:06

Right.

Erin Austin: 00:20:07

Absolutely.

Erin Austin: 00:20:07

Absolutely.

Erin Austin: 00:20:09

So when someone comes to you, like, how do they know they need you?

Erin Austin: 00:20:12

Like, what are they experiencing that they go, I need to go talk to Melissa?

Melissa Houston: 00:20:16

Typically what I see is there's a lot of fear and anxiety

Melissa Houston: 00:20:19

when, when people come to me because they feel so overwhelmed about their

Melissa Houston: 00:20:24

business finances and they, they feel like, this is generalization, but

Melissa Houston: 00:20:30

they feel like they've been failing.

Melissa Houston: 00:20:31

Right.

Melissa Houston: 00:20:32

And what I often say to, to people is that you started your business

Melissa Houston: 00:20:39

with the passion that you had to help people, you know?

Melissa Houston: 00:20:42

So whether you're a lawyer or you're a dentist, or you're selling jewelry,

Melissa Houston: 00:20:47

whatever the case may be, that is what you were passionate about and

Melissa Houston: 00:20:50

that's how you wanted to help people.

Melissa Houston: 00:20:52

Chances are nobody really taught you how to manage the

Melissa Houston: 00:20:54

money in your business, right?

Melissa Houston: 00:20:57

And even if you did take an accounting or business class,

Melissa Houston: 00:21:00

they didn't teach you that.

Melissa Houston: 00:21:02

You know, like nobody really teaches you how to do that.

Melissa Houston: 00:21:06

So accountants know how to do it because that's what we've done since day one.

Melissa Houston: 00:21:10

I mean, even as an accounting student, I was not taught how to manage money.

Melissa Houston: 00:21:14

I was taught debits and credits and you know, financial reports

Melissa Houston: 00:21:17

and blah, blah, blah, this stuff.

Melissa Houston: 00:21:19

But nobody taught us how to put it together.

Melissa Houston: 00:21:22

We just figured it out, right.

Melissa Houston: 00:21:24

So having that opportunity to have somebody to show you exactly what you

Melissa Houston: 00:21:29

need to know really alleviates the stress.

Erin Austin: 00:21:33

Right.

Erin Austin: 00:21:33

You know, I just turned the page on my questions here and I realized I missed

Erin Austin: 00:21:37

one that I wanted to talk to you about in terms of calculating profit, which.

Erin Austin: 00:21:41

you know, not just calculating it on the entire business, but like

Erin Austin: 00:21:45

assuming it's a service based business and we have different services.

Erin Austin: 00:21:48

Let's say we do some one on one stuff, maybe we do some group coaching,

Erin Austin: 00:21:52

maybe we have some sort of product like measuring profit, the importance

Erin Austin: 00:21:56

of measuring profit for each of your offerings versus just on the whole company

Melissa Houston: 00:22:01

Such a good question.

Melissa Houston: 00:22:02

I love this question.

Melissa Houston: 00:22:03

Yes.

Melissa Houston: 00:22:04

And this is where we definitely examine that and the, when we're looking at

Melissa Houston: 00:22:08

the pricing strategies, right, because it's really important, especially

Melissa Houston: 00:22:11

for product based businesses, I find a lot of them don't know what the

Melissa Houston: 00:22:16

gross margin is on their products.

Melissa Houston: 00:22:18

So the gross margin is the.

Melissa Houston: 00:22:22

Price that they're charging for their product or services, and then all the

Melissa Houston: 00:22:26

direct costs that go into it, Right?

Melissa Houston: 00:22:29

So what happens is for product based businesses, they think

Melissa Houston: 00:22:33

that their best seller is.

Melissa Houston: 00:22:35

Their highest paying product, right?

Melissa Houston: 00:22:39

But what happens is your best seller may actually be putting you in the hole

Melissa Houston: 00:22:43

if you don't understand your numbers.

Melissa Houston: 00:22:45

So you have to examine all the costs that go into this and make

Melissa Houston: 00:22:48

sure that you're priced accordingly and turn that best seller into

Melissa Houston: 00:22:52

your profit making machine as well.

Melissa Houston: 00:22:54

Right?

Melissa Houston: 00:22:55

So, yeah, that is definitely part of the strategy.

Melissa Houston: 00:22:58

We look at all the products and services that are being offered and price them

Melissa Houston: 00:23:02

accordingly so that you are making that industry standard gross margin.

Erin Austin: 00:23:08

Right.

Erin Austin: 00:23:09

Yeah, no, that, that was a recent revelation for me.

Erin Austin: 00:23:11

Like where, where, you know, as I work with, with my accountant about like

Erin Austin: 00:23:16

tracking the different income streams differently, and I, first, I'm like,

Erin Austin: 00:23:19

What, what difference does it make?

Erin Austin: 00:23:20

But like, Oh no, you have to

Melissa Houston: 00:23:21

Yeah.

Melissa Houston: 00:23:21

When you start seeing what, what makes most money, chances are you're

Melissa Houston: 00:23:24

gonna start focusing on selling that

Melissa Houston: 00:23:26

, Erin Austin: Yes, exactly.

Melissa Houston: 00:23:27

you know?

Erin Austin: 00:23:27

exactly.

Erin Austin: 00:23:28

Yes.

Erin Austin: 00:23:29

okay, so this is the Hourly to Exit podcast.

Erin Austin: 00:23:33

And so here we talk about that journey from that unsustainable hourly model

Erin Austin: 00:23:38

to building a business that hopefully can sell some day and create wealth.

Erin Austin: 00:23:42

And you know, part of that, of course is creating assets to having

Erin Austin: 00:23:45

exclusivity in your business.

Erin Austin: 00:23:47

And so the assets and including IP and.

Erin Austin: 00:23:51

Market positioning as well as having predictability in the business.

Erin Austin: 00:23:55

So you have independence from the founder and that you have SOPs and the like.

Erin Austin: 00:23:59

And so when, when we talk about the context of building a scalable

Erin Austin: 00:24:03

and saleable services business, like where does your role come

Erin Austin: 00:24:06

in and how do you help them

Erin Austin: 00:24:08

get there?

Melissa Houston: 00:24:09

Yeah, so this is a good question as well, because when investors

Melissa Houston: 00:24:14

are looking to buy your business, they're gonna care about how much cash you're

Melissa Houston: 00:24:17

generating in your business, right?

Melissa Houston: 00:24:19

And we want to make sure that you are at the right place

Melissa Houston: 00:24:25

financially to sell your business.

Melissa Houston: 00:24:27

So they will look at it as a good investment.

Melissa Houston: 00:24:30

So making sure that your books are up to date and accounted for correctly.

Melissa Houston: 00:24:35

I mean, so many times I've seen huge messes in the bookkeeping.

Melissa Houston: 00:24:39

So making sure that's all cleaned up before you put your business up to sell.

Melissa Houston: 00:24:43

And ensuring that you're optimizing the profit in your business so that

Melissa Houston: 00:24:49

you can get a bigger price tag for it.

Erin Austin: 00:24:51

Right.

Erin Austin: 00:24:51

Absolutely.

Erin Austin: 00:24:52

You mentioned, one of the things that you do is help people go

Erin Austin: 00:24:55

from six figures to seven figures.

Erin Austin: 00:24:57

Is there a ma is there magic there between six and seven?

Erin Austin: 00:25:01

Like when, When looking at that exit?

Melissa Houston: 00:25:03

I would say if I was looking at it with my investor eyes

Melissa Houston: 00:25:07

on it, it wouldn't matter if it's a six, seven, or eight figure business.

Melissa Houston: 00:25:11

I would be looking at the profit margins.

Melissa Houston: 00:25:13

Right.

Erin Austin: 00:25:14

That's what it was.

Erin Austin: 00:25:15

At Profit Margins.

Erin Austin: 00:25:16

We were talking about the, the 50%.

Erin Austin: 00:25:17

That's what I was,

Melissa Houston: 00:25:18

Yeah.

Melissa Houston: 00:25:18

Yeah.

Melissa Houston: 00:25:19

So making sure that the profit margins are healthy, because if you've got a

Melissa Houston: 00:25:22

really good business, but the investor wants to grow that business, they're

Melissa Houston: 00:25:27

totally able to do that if you've got that solid financial foundation.

Melissa Houston: 00:25:31

Right.

Melissa Houston: 00:25:32

So it would be much more appealing to me to purchase a Business that earns

Melissa Houston: 00:25:38

about 500,000 revenue, but the profit margins are at 50% versus somebody

Melissa Houston: 00:25:44

who's earning, you know, two, 3 million.

Melissa Houston: 00:25:46

But the profit margins are at 20%.

Melissa Houston: 00:25:48

The big difference is that big chunk of money that you're

Melissa Houston: 00:25:51

gonna have at the end, right?

Melissa Houston: 00:25:53

So to grow and scale a business that it's at 50% profit margin is so

Melissa Houston: 00:25:57

much easier than doing it backwards

Melissa Houston: 00:26:01

did that make sense?

Melissa Houston: 00:26:02

That got a little

Melissa Houston: 00:26:03

convoluted there.

Erin Austin: 00:26:04

No, no, it absolutely did.

Erin Austin: 00:26:05

Yeah.

Erin Austin: 00:26:06

And yeah.

Erin Austin: 00:26:06

And that, you know, a buyer is buying know your, your future, not your past.

Erin Austin: 00:26:11

Right.

Erin Austin: 00:26:11

So

Melissa Houston: 00:26:11

Exactly, exactly.

Melissa Houston: 00:26:13

They're gonna look at the financial potential of the business.

Melissa Houston: 00:26:15

They're gonna look at all sorts of other financial ratios, like

Melissa Houston: 00:26:19

customer retention, customer satisfaction, Um, the list goes on.

Melissa Houston: 00:26:24

I can't think of any off the top of my head, but there's, there's a lot

Melissa Houston: 00:26:28

of financial ratios that they're gonna examine when they're looking to purchase

Melissa Houston: 00:26:32

a business.

Erin Austin: 00:26:33

Right, right.

Erin Austin: 00:26:34

Well, that brings us to the fact that this is a very meta podcast.

Erin Austin: 00:26:37

You know, I'm a female founder of an expertise based business that

Erin Austin: 00:26:41

I'm hoping to grow to sell someday, and you are the female founder

Erin Austin: 00:26:45

of an expertise based business.

Erin Austin: 00:26:46

So are you growing your business to perhaps sell some

Melissa Houston: 00:26:50

Absolutely

Erin Austin: 00:26:53

course?

Melissa Houston: 00:26:54

the smart thing to do.

Melissa Houston: 00:26:55

You know, you know, I, I really made a conscious effort with, she needs profit

Melissa Houston: 00:27:00

to separate my name from the business and ensure that the business can go on

Erin Austin: 00:27:04

Right, Right.

Erin Austin: 00:27:06

Do you have a team or how do you use solo?

Erin Austin: 00:27:08

Or how do you set up your,

Melissa Houston: 00:27:09

I have a little, Yeah.

Melissa Houston: 00:27:11

I mean, may, It's my personality defect, right?

Melissa Houston: 00:27:13

I have a little bit of a control freak, so I have a team, but I

Melissa Houston: 00:27:17

don't have anybody on payroll,

Erin Austin: 00:27:19

Yeah.

Melissa Houston: 00:27:19

I contract my

Erin Austin: 00:27:21

Yeah, that's definitely a team.

Erin Austin: 00:27:22

That's absolutely a

Erin Austin: 00:27:23

team.

Erin Austin: 00:27:23

Yeah,

Erin Austin: 00:27:24

Yeah, and I mean that's just, if you're using a team that shows

Erin Austin: 00:27:26

that you have systems in place and that you have, you know, that's

Erin Austin: 00:27:29

not just you with your genius,

Erin Austin: 00:27:31

which is hard to genius,

Melissa Houston: 00:27:34

Exactly.

Melissa Houston: 00:27:35

Yeah.

Melissa Houston: 00:27:36

Yeah.

Melissa Houston: 00:27:37

And you know, some people think like, oh, having somebody on payroll is absolutely,

Melissa Houston: 00:27:40

you know, the only way to have a team.

Melissa Houston: 00:27:42

But that's not the case.

Melissa Houston: 00:27:43

And I prefer to, outsource because, like, say for example, marketing and

Melissa Houston: 00:27:48

social media, if they're on my payroll, that means I'm responsible for ensuring

Melissa Houston: 00:27:54

that their knowledge stays up to date.

Melissa Houston: 00:27:56

I don't know the first thing about that,

Erin Austin: 00:27:58

Mm, right?

Melissa Houston: 00:27:59

burdened with it.

Erin Austin: 00:28:00

Yeah.

Erin Austin: 00:28:00

Yeah.

Erin Austin: 00:28:00

I mean, unless you have, you know, enough, uh, activity.

Erin Austin: 00:28:05

You know, keeping up to date on those things internally makes sense.

Erin Austin: 00:28:09

Like, I mean, the fractional CFO thing, it's kind of the same issue.

Erin Austin: 00:28:11

Like how much of that do you need in house?

Erin Austin: 00:28:14

And people are afraid.

Erin Austin: 00:28:15

They feel like a team means employees and Absolutely does not.

Erin Austin: 00:28:18

I, I agree a hundred percent that team can be your contractors, and that it's a

Erin Austin: 00:28:24

great way to, you know, add leverage to our businesses and, and help us grow cuz.

Melissa Houston: 00:28:28

Yeah.

Erin Austin: 00:28:29

Stay in your zone in Genius.

Erin Austin: 00:28:31

So to wrap up, um, I know you have a book coming out.

Erin Austin: 00:28:34

Please tell us about that.

Melissa Houston: 00:28:36

Oh, thank you.

Melissa Houston: 00:28:37

I'm super excited about this book.

Melissa Houston: 00:28:38

It's called Cash Confident.

Melissa Houston: 00:28:40

It's the Entrepreneur's Guide to Creating a Profitable Business, and

Melissa Houston: 00:28:43

it will be for sale and bookstores.

Melissa Houston: 00:28:45

the job date is May 16th, 2023.

Melissa Houston: 00:28:48

Little bit of ways, but.

Melissa Houston: 00:28:49

Still super excited about it, getting the word out about it so that people are

Melissa Houston: 00:28:54

aware that there's going to be an extra resource to help them create the most

Melissa Houston: 00:28:57

profitable business that they can create.

Erin Austin: 00:29:00

Tell us about the, the timeline of getting like a year from

Erin Austin: 00:29:04

when, you know, you're writing the book.

Erin Austin: 00:29:05

Like is that just the publisher's timeline?

Erin Austin: 00:29:07

Like how does

Melissa Houston: 00:29:08

That's the publisher's timeline.

Melissa Houston: 00:29:10

So it was really important to me to get a traditional book publishing

Melissa Houston: 00:29:12

deal and I, you know, by most standards I got very, very lucky.

Melissa Houston: 00:29:17

So this is actually happening pretty quickly.

Melissa Houston: 00:29:21

So.

Melissa Houston: 00:29:22

let's see.

Melissa Houston: 00:29:23

They purchased the book February 20 of this year.

Melissa Houston: 00:29:27

We're in 2022.

Melissa Houston: 00:29:29

Okay.

Melissa Houston: 00:29:29

Sorry.

Melissa Houston: 00:29:30

The pandemic has messed up my memory.

Melissa Houston: 00:29:35

So February, 2022 and then, Going through the timeline to May 16th, 2023,

Melissa Houston: 00:29:42

there's still a lot of work to be done.

Melissa Houston: 00:29:43

There's edits that we still need to go through and book covers, it's a long

Melissa Houston: 00:29:47

road to getting a, a book published when, when you're doing it through a

Erin Austin: 00:29:52

Mm-hmm.

Erin Austin: 00:29:53

That's very exciting.

Erin Austin: 00:29:54

And did you have a whole, outline or like how much did you have to sell your book?

Melissa Houston: 00:29:59

Oh, I had a book proposal that I had been working on for

Melissa Houston: 00:30:02

about eight months

Melissa Houston: 00:30:04

and got a financial literary agent, and then we decided to change a bit of

Melissa Houston: 00:30:07

it, so then worked on it for another three months, and then she sold it.

Melissa Houston: 00:30:13

So a lot of work went into the book proposal, which is completely

Melissa Houston: 00:30:16

separate from the actual book

Erin Austin: 00:30:18

Right.

Melissa Houston: 00:30:19

So it's quite a long process, but by by standards.

Melissa Houston: 00:30:25

I did it within two years.

Melissa Houston: 00:30:28

I guess it'll be about two and a half years by the time it's published.

Melissa Houston: 00:30:31

So I feel very fortunate about

Erin Austin: 00:30:33

Yeah.

Erin Austin: 00:30:33

that.

Erin Austin: 00:30:34

is fantastic.

Erin Austin: 00:30:35

And so I know you have an offer that you share that you can share with the

Melissa Houston: 00:30:39

Yes.

Melissa Houston: 00:30:40

So for anybody who's interested in learning more about being the most

Melissa Houston: 00:30:43

successful business owner that you can be in creating that profit in your business

Melissa Houston: 00:30:47

and understanding your business numbers, uh, you can download my free guide.

Melissa Houston: 00:30:51

It's the Five Step Roadmap to Biz Finance Freedom.

Melissa Houston: 00:30:55

I'll send you the link.

Melissa Houston: 00:30:55

I'm assuming you'll leave it in the show notes.

Erin Austin: 00:30:57

absolutely.

Melissa Houston: 00:30:58

Perfect.

Melissa Houston: 00:30:59

And um, yeah, you can get the, I think it's like a better seven or

Melissa Houston: 00:31:03

eight page guide and it gives you more information on how to do that.

Erin Austin: 00:31:07

Fantastic.

Erin Austin: 00:31:08

Absolutely.

Erin Austin: 00:31:08

That will be in the show notes and as well as please tell

Erin Austin: 00:31:11

people where they can find you.

Melissa Houston: 00:31:13

Yeah, so my main site is Melissa Houston

Melissa Houston: 00:31:15

cpa.com, and she means profit.com.

Melissa Houston: 00:31:20

And I also have a podcast called She Means Profit.

Melissa Houston: 00:31:23

Tune into it and learn all about how you can create profitability in your business.

Erin Austin: 00:31:28

Fantastic.

Erin Austin: 00:31:29

Well, this has been so wonderful.

Erin Austin: 00:31:31

Thank you so much for sharing your wisdom.

Erin Austin: 00:31:34

I know it was tremendously valuable to the audience, and I

Erin Austin: 00:31:37

look forward to doing again soon.

Melissa Houston: 00:31:38

Thank you so much for having me.

Melissa Houston: 00:31:40

This has been such a fun talk.

Erin Austin: 00:31:41

Good.

Erin Austin: 00:31:41

Thank you.